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Home / World

California in budget hell

4 Jul, 2003 10:47 PM5 mins to read

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By ANDREW GUMBEL

WASHINGTON - The state of California is officially broke.

The richest, most populous state in the union - by some measures the world's fourth or fifth biggest economy - is facing a staggering budget deficit of US$38 billion ($64 billion).

But the legislature, riven by unprecedented partisan rivalries including a
vicious battle to unseat the governor just months after his re-election and possibly replace him with Terminator star Arnold Schwarzenegger, never stood a chance of meeting the nominal deadline this week to balance the books for the new budgetary year.

Worse, the longer the legislature dilly-dallies, the bigger the deficit will become. It stood at US$34 billion a couple of months ago; by the end of summer, it is expected to top US$40 billion. It is more than the budget deficits of all the other deficit-ridden US states put together.

Since states, unlike countries, are not allowed to run deficits, California is facing the equivalent of the bailiffs coming around to impound the furniture.

Summer courses at community colleges are expected to be the first casualties. Then nursing homes. Then police academies. Tens of thousands of teachers may get laid off.

All this would be bad enough even without the tawdry politics behind it. In many ways, the situation is reminiscent of the 1995 stand-off between President Clinton and the Clinton-hating Republicans in Congress who preferred to shut down the federal Government rather than sign off on the White House's budget proposals.

Only this time the cast of characters is a few notches more colourful, featuring, among others, a car alarm salesman with a dodgy past from San Diego - and Schwarzenegger.

The Californian crisis is a fight in which everyone from the Bush White House down has a stake. Republicans are crying foul about the corruption of de facto one-party rule by the Democrats. Democrats are accusing the Republicans of attempting a bloodless coup to seize control in a state where they routinely lose almost every election.

California is in budget hell largely because of the slackening economy.

But it has also suffered from effective lobbying, over a period of decades, by anti-tax advocates who have placed strict limits on property taxes and required that any tax increase be approved by two-thirds of the state legislature.

That makes California's economy singularly inflexible: when times are good, the revenue rolls in and everything is peachy, but when they are bad there is almost no stability in the system.

Enter the Democratic governor, Gray Davis, first elected in 1998, whose popularity has plummeted because of the perception that he can't handle crises and has only one true talent: raising money for himself and scratching the backs of his campaign contributors.

Democrats and Republicans hate him pretty much equally, but Republicans hate him more simply because he is in power and they are not. Hence the campaign to have Davis "recalled", just months after his re-election last November. (He won largely by default, since his Republican challenger, a rich neophyte called Bill Simon, ran a dismal campaign and came off even worse than the unloved Davis.)

The recall, which needs the signatures of about 900,000 eligible voters to get on the ballot this November, is being co-ordinated by Darrell Issa, an ambitious, rich Republican congressman from San Diego.

Issa is not exactly Prince Charming: he is too rightwing for the Californian mainstream and has a questionable history involving stolen cars - his brother is an acknowledged car thief - that casts an interesting psychological light on his career selling car alarms.

Issa has made better headway than expected, having collected more than 400,000 signatures so far. (The deadline is September 2.) The big question, though, is what will happen if there is a recall election - a scrappy affair in which anyone can participate and the person with the most votes on the first round wins. Issa clearly wants to run, but many Republican strategists would prefer someone more palatable.

The name that comes up most often is Arnold Schwarzenegger, who has name recognition galore even if he is an unknown quantity in political terms.

Suspicions are rising, meanwhile, that the Republicans are refusing to agree to a budget on the theory that the worse things get for California the better they get for their chances of toppling Governor Davis.

It's a strategy that is making even some Republicans queasy: several have openly wondered if the recall is such a good idea, and three have signed an open letter to President Bush at the weekend urging the White House to distance itself from the whole spectacle. California's economy, they wrote, is too important to become hostage to a democratically questionable political gambit.

Bush, of course, knows a thing or two about bloodless coups, having been accused of staging one in Florida to enter the White House. For the moment, he is saying nothing, letting California stew in its own juice a little longer before making his pronouncement.

- INDEPENDENT

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